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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Plastic spoons and personal protective equipment are far from racy. But “Boring Bunzl” defied its nickname this week by upping profit guidance and announcing £250mn of buybacks for this year. In response, shares in the distributor of dull but essential products for businesses rose as much as 9 per cent on Tuesday to a record high.
Bunzl is a member of Lex’s “XFT” index, created in 2017 for a group of FTSE 100 companies that rarely generate eye-catching headlines but deliver steady, stable and outperforming returns for shareholders. In Bunzl’s case, it continues to tick all of the boxes. But Lex wanted to see if its 2017 thesis still held strong.
The XFT index has been updated to include 27 stocks. Included are those that had two or fewer mentions in decent-length articles in the Financial Times in the past year. New entrants to the index include engineer Weir Group and IMI.
Taking the index as a whole, Bunzl came eighth in terms of total returns over the past five years, delivering 93 per cent. The group received a big boost during the pandemic. This shows few signs of reversing; Bunzl’s revenues this year will be only a few hundred million below the £12bn peak reached in 2022, according to estimates on Visible Alpha. What has changed are operating margins — and for the better. These have moved up close to 8 per cent, helped by US acquisitions, from 7 per cent in 2021.
Buyout business 3i came top in the newly revamped XFT index, as its Dutch discount retailer Action continued to churn out cash. In the past five years, 3i generated total returns of 250 per cent. Diploma, a supplier of technical bits and bobs such as wires and seals came next: its returns over the same period were 205 per cent. Like Bunzl, Diploma pursues a strategy of organic growth supplemented with bolt-on acquisitions.
Long-term XFT index members such as Sage and Relx were also among the top 10 performers. Halma and Compass, also both in previous iterations of the index, generated mid-table returns.
Even with a few members making negative returns over five years, such as Premier Inn owner Whitbread, the XFT index as a whole outperformed the wider FTSE 100. It rose 82 per cent versus the FTSE 100’s 41 per cent over the past five years.
“There is no such thing as bad publicity” is an often overused phrase. But a lack of limelight continues to be a good thing for these reliable returners.
